Standing Committee E

[Mr. Peter Atkinson in the Chair]

Communications Bill

Clause 193 - Functions of OFCOM in relation to the BBC

Amendment proposed [this day]: No. 22, in 
clause 193, page 171, line 12, at end insert— 
 '( ) the BBC Charter;'.—[Mr. Lansley.]
 Question again proposed, That the amendment be made.

Peter Atkinson: I remind the Committee that with this we are taking the following:
 Amendment No. 43, in 
clause 193, page 171, line 17, at end insert 
 'and to enforce the terms of the BBC Fair Trading Commitment as currently drafted'.
 Amendment No. 149, in 
clause 193, page 171, line 23, at end insert— 
 '(2A) In exercising their functions under this section OFCOM shall consult with and have regard to the views of persons providing services and facilities other than the BBC who, in their opinion, are likely to be affected by the BBC's services.'.
 New clause 18—BBC statements of programme policy— 
'(1) Any agreement made (whether before or after the coming into force of this section) between the BBC and the Secretary of State to regulate the provision of the BBC's services shall include (and in the event the agreement does not so include shall be deemed to include) an obligation on the BBC— 
 (a) as soon as practicable after the coming into force of this section and subsequently at annual intervals to prepare and publish a statement of programme policy for each of the BBC's services; and 
 (b) for the BBC to monitor its own performance in the carrying out of the proposals contained in the statements. 
 (2) Every statement of programme policy must include— 
 (a) proposals for securing that during the following year— 
 (i) the public service role of the BBC and the BBC's services will be fulfilled; 
 (ii) the functions, duties and obligations of the BBC and the BBC services as set out in the Charter and Agreement will be fulfilled; 
 (iii) such other matters as OFCOM may determine from time to time; 
 (b) a report on the performance of the BBC in the carrying out, during the period since the previous statement, of the proposals contained in that statement. 
 (3) The BBC shall comply with subsection (4) in the case of a statement of programme policy containing proposals for a significant change. 
 (4) This subsection requires the BBC— 
 (a) to consult OFCOM before preparing the statement; and 
 (b) to take account, in the preparation of the statement, of any opinions expressed by OFCOM. 
 (5) If it appears to OFCOM that a statement of programme policy has been prepared by the BBC in contravention of a condition imposed under subsection (4), the BBC must— 
 (a) revise that statement in accordance with any directions given to it by OFCOM; and 
 (b) publish a revision of the statement in accordance with any such directions only after the revision has been approved by OFCOM. 
 (6) A change is a significant change for the purposes of this section if it is a change as a result of which the service would in any year be materially different in character from in previous years. 
 (7) In determining under this section whether a change is a significant change— 
 (a) regard must be had to any guidance issued by OFCOM; 
 (b) the changes to be considered include any changes that, together with any proposed change for a particular year, would constitute a change occurring gradually over a period of not more than three years; and 
 (c) the previous years with which a comparison is to be made must be those immediately preceding the year in which the change is made, or in which the changes comprised in it began to occur. 
 (8) It shall be the duty of OFCOM— 
 (a) from time to time to review the guidance for the time being in force for the purposes of this section; and 
 (b) to make such revisions of that guidance as they think fit.'.
 New clause 19—Duty of OFCOM in relation to the BBC's new services— 
'(1) Prior to the Secretary of State approving under the Charter or the Agreement the provision by the BBC of any new service or changes to an existing service whether or not a broadcasting or programme supply service it shall be the duty of OFCOM to prepare and publish a report commenting on whether the proposed new service or changes to the existing service will satisfy the objectives set out in subsection (2). 
 (2) The objectives referred to in subsection (1) are— 
 (a) the new service or the changes to the existing service are compatible with the BBC's primary public service role as set out in the Charter and Agreement and that it shall further any or all of the public purposes of the BBC or any of the services it provides as set out in those documents; 
 (b) that the value to the public of the new service or changes to an existing service will be proportionate to the likely impact on the market; 
 (c) that the new service will be universally accessible within a reasonable period of time free at the point of use; 
 (d) that the new service or the changes to the existing service will represent value for money for licence fee payers. 
 (3) It shall be the duty of OFCOM— 
 (a) as soon as practicable after the end of the period of twelve months beginning with the commencement of this section; and 
 (b) as soon as practicable after the end of each subsequent period as may be selected by OFCOM for the purposes of this section 
 to satisfy, for that period, the review and reporting obligations of subsection (4). 
 (4) The review and reporting obligations are— 
 (a) an obligation to carry out a review of the extent to which new services provided by the BBC and changes to existing services— 
 (i) comply with the terms of the approval granted by the Secretary of State for such new services or changes to existing services; and 
 (ii) satisfy the objectives set out in subsection (2); 
 (b) an obligation to prepare a report on the matters found on the review. 
 (5) In this section 
 ''Charter'' means the Royal Charter for the Continuance of the British Broadcasting Corporation—May 1996 and any renewal or replacement thereof; 
 ''Agreement'' means any agreement made (whether before or after the coming into force of this section) between the BBC and the Secretary of State to regulate the provision of the BBC's services and the carrying on by the BBC of other activities for purposes connected with the provision of those services. 
 (6) In this section for the purposes of the review and reporting obligations of OFCOM ''new services'' shall mean all new services approved (whether before or after the coming into force of this section) by the Secretary of State under the Charter or the Agreement.'.
 New clause 20—OFCOM review duties in relation to BBC's services— 
'(1) Prior to the Secretary of State approving under the Charter or the Agreement the provision by the BBC of any new service or changes to an existing service whether or not a broadcasting or programme supply service it shall be the duty of OFCOM to prepare and publish a report commenting on whether the proposed new service or changes to the existing service will satisfy the objectives set out in subsection (2). 
 (2) The objectives referred to in subsection (1) are— 
 (a) the new service or the changes to the existing service are compatible with the BBC's primary public service role as set out in the Charter and Agreement and that it shall further any or all of the public purposes of the BBC or any of the services it provides as set out in those documents; 
 (b) that the value to the public of the new service or changes to an existing service will be proportionate to the likely impact on the market; 
 (c) that the new service will be universally accessible within a reasonable period of time free at the point of use; 
 (d) that the new service or the changes to the existing service will represent value for money for licence fee payers. 
 (3) The BBC shall— 
 (a) as soon as practicable after the coming into force of this section and subsequently at annual intervals prepare and publish a statement of programme policy for each of the BBC's services; and 
 (b) monitor its own performance in the carrying out of the proposals contained in the statements. 
 (4) Every statement of programme policy must include— 
 (a) proposals for securing that during the following year— 
 (i) the public service role of the BBC and the BBC's services will be fulfilled; 
 (ii) the functions, duties and obligations of the BBC and the BBC's services as set out in the Charter and Agreement will be fulfilled; 
 (iii) such other matters as OFCOM may determine from time to time; 
 (b) a report on the performance of the BBC in the carrying out, during the period since the previous statement, of the proposals contained in that statement. 
 (5) It shall be the duty of OFCOM as soon as practicable after the end of the period of twelve months beginning with the commencement of this section and thereafter at such periods as OFCOM may determine to prepare and publish a report which must— 
 (a) comment on the extent to which new services provided by the BBC and changes to existing services— 
 (i) comply with the terms of the approval granted by the Secretary of State for such new services or changes to existing services; and 
 (ii) satisfy the objectives set out in subsection (2); 
 (b) comment on the extent to which the BBC has— 
 (i) fulfilled any statement of programme policy made by it; 
 (ii) made an adequate contribution towards the satisfaction of the general purposes of public service television broadcasting in the United Kingdom set out in section 256(4); 
 (c) specify the changes which in the opinion of OFCOM are required to the agreement between the BBC and the Secretary of State to ensure that the BBC fulfils the statements of programme policy referred to in subsection (3) and that the BBC makes an adequate contribution to public service television broadcasting in the United Kingdom. 
 (6) In this section— 
 ''Charter'' means the Royal Charter for the Continuance of the British Broadcasting Corporation—May 1996 and any renewal or replacement thereof; 
 ''Agreement'' means any agreement made (whether before or after the coming into force of this section) between the BBC and the Secretary of State to regulate the provision of the BBC's services and to carrying on by the BBC of other activities for purposes connected with the provision of those services. 
 (7) In this section ''new services'' shall mean all new services approved (whether before or after the coming into force of this section) by the Secretary of State under the Charter or the Agreement.'.
 New clause 29—Power to confer further functions on OFCOM relating to the BBC— 
'(1) The Secretary of State may by order amend this Act to such extent as he considers appropriate to give effect to the provisions of— 
 (a) any Royal Charter granted to the BBC after the commencement date; 
 (b) any licence granted by the Secretary of State to the BBC after that date; 
 (c) any agreement made by the Secretary of State and the BBC after that date. 
 (2) In subsection (1) ''the commencement date'' means the date of commencement of section 193. 
 (3) An order under this section shall not be made unless a draft of the order has been laid before Parliament and approved by a resolution of each House.'.

Michael Fabricant: What I was saying before we were so rudely interrupted by the new hours was that the History Channel had made a number of complaints to the BBC, saying that UK History represented unfair competition. I said this morning that I thought that it was perfectly fair for the BBC to use its own facilities, provided that it used them fairly, not unfairly, in a competitive market. The judgement as to whether that is unfair should ultimately rest not with the BBC, but with an independent outside organisation such as Ofcom.
 The question of whether the BBC should be allowed to compete arose in this morning's debate. I think that the BBC should always be allowed to compete, as long as it does so in a fair environment. My hon. Friend the Member for Maldon and East Chelmsford (Mr. Whittingdale) made some remarks regarding BBC News 24, and I must say that I disagree with them; it would have been odd indeed had the BBC not launched such a programme channel. The BBC has some 50 bureaux overseas. If I may make a brief plug, my former company—in which I now have no financial interest, as I sold all my shares in it before I became a Member of Parliament—equipped the BBC bureaux with radio studios in Los Angeles, Washington, New York, Sydney, Moscow and 
 elsewhere. The BBC has something like 250 foreign correspondents, either based at a bureau or moving around.

John Whittingdale: I do not think that there is too much difference between us. I hope that my hon. Friend accepts that it is important that, when the BBC decides to launch a new service, it should be distinctive. I shall give an example from radio, in which I know that he is very interested. Both Radio 1 and Radio 3 are matched by commercial stations in the form of Classic FM and, for instance, Capital. Those stations concentrate on a mass audience, but the BBC stations concentrate on a distinctive public service agenda that is slightly different. The same should apply to the difference between BBC News 24 and UK History and their independent alternatives.

Michael Fabricant: I agree with my hon. Friend, but I believe that News 24 is distinctive. Its style is very different to that of ITV's 24-hour news service and Sky News. My only criticism is of the rather weird representation that was made to the Department for Culture, Media and Sport by Richard Lambert, who said that BBC News 24 should be more similar to Sky News. I had to smile, because one of the recommendations made was that BBC News 24 should have breaking news like Sky News. The next day, when I was watching BBC News 24, up came ''Breaking news''. Now, hardly a minute goes by on BBC News 24 without ''Breaking news'' on our screens.
 BBC News 24 provides a distinctive and separate service. Are we the ones who should be the judge, ultimately? No. Should the BBC be the judge when there is an argument? The answer must be no if justice is to be seen to be done. However, I certainly agree with my hon. Friend the Member for Maldon and East Chelmsford about cross-promotion. Let us be clear: Radio Times is a nice little earner, and is good for the BBC because the money it makes goes back into the corporation and goes towards the funding of programmes. However, as my hon. Friend the Member for Maldon and East Chelmsford said, there must be fair competition under the terms of the BBC's commitment, because not an hour goes by when there is not cross-promotion on BBC 1—and, to a lesser extent, on BBC 2—for Radio Times. Radio Times is in competition with other programme journals, so there is an argument that a notional fee should be paid for the advertising or promotional time that is made available to it on BBC 1 and BBC 2—although I am unsure to whom the fee should be paid, as the money would appear to go around in a complete circle.

John Whittingdale: My hon. Friend raises the interesting issue of cross-promotion. The best current example of that is the huge resources that the BBC is putting into advertising Freeview and the digital channels that are now available on it. It justifies that by saying that the intention is to encourage digital take-up. ITV Digital also carried BBC digital channels when it was in operation, but I do not recall the BBC ever promoting ITV Digital, even though one could equally well argue that, in the cause of digital
 switchover, it would have been right for the BBC to do so.

Peter Atkinson: Order. Before the hon. Gentleman replies, I have a couple of requests. Can we keep interventions brief, and can we keep the noise level down? These proceedings are being broadcast, and if hon. Members talk all of the time it is difficult for the broadcasting authorities and Hansard to hear what is going on.

Michael Fabricant: Thank you for those remarks, Mr. Atkinson: I know that the BBC will be particularly interested in re-broadcasting my speech.
 My hon. Friend has made an important point. I am unsure whether I would agree with him that the BBC is at fault in promoting Freeview because I believe that that was a clever initiative by the BBC. Although Freeview is a joint venture between the corporation, Crown Castle—which is the old transmission division of the BBC—and Sky, the BBC pulled the whole thing together, and it is to be congratulated on that. As I said in an earlier sitting, the Independent Television Commission was right to decide that Freeview should have the digital terrestrial licence, because people will only have an incentive to buy digital units if free-to-air programming is provided. 
 My hon. Friend asked the perfectly reasonable question of who should be the final arbiter. Justice needs to be seen to be done: the BBC ought not to be seen to be its own judge and jury, even when they are right—which is more often than not, I suspect. With regard to that, I will offer one example involving a constituent. Mr. Ian Payne of Lichfield wrote to me about the Nicky Campbell show on Radio 5 Live. He thought that someone was advocating paedophilia, and Fraser Steel, the BBC's head of programme complaints, responded by producing transcripts of what was said. In my judgment, his reply was reasonable. However, the final paragraph states, 
''I do not feel able to uphold Mr. Payne's complaint. Thank you for writing and giving me the opportunity to address your constituent's concerns'',
 which is fine, but that is now the end of the matter. If Mr. Payne feels that the BBC is still at fault, there is very little that he can do. There is the Broadcasting Standards Commission, but it does not have very sharp teeth. The BBC needs to be seen to be under the same auspices as any other responsible organisation—such as ITV or British Telecom—that will come under the general auspices of Ofcom. 
 My hon. Friend the Member for Maldon and East Chelmsford rightly mentioned the BBC brand, again in connection with free trade. Arguments might arise regarding that. I used the BBC brand when the BBC was beginning to become commercial. In the 1980s, my company supplied and installed radio studio systems—among other things—and we needed to provide training. In the end, the large number of people to whom we were providing systems prevented our engineers from providing training. I remember visiting the BBC's training centre in Wood Norton, near Evesham, and suggesting that people there might like to do the training in return for payment. At the time, an individual there—I shall not mention his 
 name—said, ''Yes, I think it's a great idea, but hush it up and don't tell the BBC in London because they'll probably stop it.'' 
 People from Uganda, Indonesia and other countries came to the BBC and stayed at Wood Norton. They received magnificent certificates that had gold emblems with the BBC motto, ''Nation shall speak peace unto nation'' at the top. The certificates were in the installation, maintenance and operation of MBI broadcast systems studio equipment. MBI was my company and I thought, ''What an endorsement that was.''

Peter Atkinson: Order. It may be an endorsement of the company but it is not in order. May I ask the hon. Gentleman to come back to the subject? If he looks at clause 193, he will remember that we are talking about functions of Ofcom in relation to the BBC.

Michael Fabricant: Yes.
 My hon. Friend the Member for Maldon and East Chelmsford is right because the BBC name has huge value. The BBC should be congratulated because the name is a mark of quality, but it must be used wisely.

Chris Bryant: I think that is it.

Michael Fabricant: That may well be it. The disadvantage of lunch is that it rather destroyed my train of thought, although all I had for lunch was soup.
 The issue is simply this: when public money goes into a licence fee that is given to a public organisation, the organisation must be publicly accountable. Although the Minister will no doubt tell us that the Secretary of State is the person to whom the BBC is ultimately accountable, I argue that a distortion is created. 
 The BBC is right to compete in various areas, including its radio and television channels, and to be distinctive. However, there is always a tension in the corporation between trying to provide programmes that are popular, thus justifying the BBC's existence by achieving an audience, and trying to provide programmes that people ought to hear in the old Reithian tradition. Either extreme promises nothing but doom for the BBC. If it merely provided programmes that people ought to hear but achieved only tiny audiences, there would be a call of people saying, ''Why should we pay a licence fee when the BBC is pulling in only a small audience?'' I commend the BBC because although it is not the only public service broadcaster—ITV, Channel 4 and Sky News are public service broadcasters in different ways—it is getting the balance right by achieving a larger share of the television audience than ITV while broadcasting programmes such as ''Newsnight'', which nobody mentioned this morning and has not been dumbed down. Such a programme could not be sustained on any other television station. 
 As I said this morning, I come not to bury the BBC, but to praise it. I come to protect the BBC as well. As my hon. Friend the Member for Maldon and East Chelmsford said, ultimately bringing the BBC under 
 the powers of Ofcom in every respect—not only some respects—would protect it from complaint. Even if the BBC is right not to uphold complaints made against it, there will always be a suspicion that it is not to be trusted because it is its own judge and jury. That criticism could not survive in the environment that would be created by the amendments and new clauses.

Kim Howells: The hon. Member for Lichfield (Michael Fabricant) began by giving us a good impression of Marlon Brando playing Antony in a Hollywood version of the play. He raised the issue of ensuring an effective means of complaint at the BBC, which was a good place to start in this wide-ranging, excellent debate. That is why we have given Ofcom the ability to fine the BBC if it breaches Ofcom's programme codes.
 I was impressed by the knowledge of programmes and music cited by the hon. Member for Maldon and East Chelmsford—we must not forget to mention East Chelmsford—even if he sounded a little like Jim Branning from ''EastEnders'' at times. 
 There has been a full debate this morning on clause 193, the amendments and a range of issues relating to the BBC. I will first respond to points made by hon. Members, then talk about specific amendments and finally make some general observations. 
 Although I agree with the tone of the remarks made by the hon. Member for North Devon (Nick Harvey) about the separation of the BBC governors and Ofcom, I must correct one point. Ofcom's duties are wider and are not confined to consumers. It is responsible for securing 
''the availability . . . of a wide range of television and radio services''
 and public standards as set out in clause 3. 
 Building on what the hon. Member for Ceredigion said, Ofcom also has a principal duty in relation to the radio spectrum. Those may be small remarks but they bear making. 
 The hon. Member for South Cambridgeshire (Mr. Lansley) made some interesting points. I assure him that the language and structure of the agreement are framed in a way that preserves the core responsibilities of BBC governors in regulating the qualitative aspects of the BBC's services. It is fully consistent with the policy stated from the outset of preserving the fundamental nature and constitution of the BBC. There has never been any intention of the BBC being regulated by Ofcom at tier 3. The BBC will be expected to consider Ofcom's reports and guidance issued for tier 3 purposes, but will not be subject to formal Ofcom enforcement such as will apply to the licensed broadcasters, as the hon. Gentleman made clear. 
 The hon. Member for Maldon and East Chelmsford made some extensive and enlightening comments, but at the heart of those comments was a problem—I hesitate to call it a misunderstanding, because the hon. Gentleman has a brilliant mind and could not possibly have misunderstood what has been drafted in the Bill. I am happy, however, to clarify the issues that he 
 raised. The BBC's commercial channels, such as UK History, will be fully regulated by Ofcom on the same basis as all other commercial channels. The agreement that we have discussed covers the BBC's public services, but not the commercial channels. The BBC's commercial services are subject to UK and EU competition law. 
 This is a good moment to cover the interesting points about UK History that were raised by the hon. Members for Maldon and East Chelmsford and for Lichfield. UK History is a commercial channel that is funded by a joint venture with the BBC's commercial arm, BBC Worldwide, and Flextech. The licence fee is not used, either directly or indirectly, to subsidise that venture.

Michael Fabricant: I am grateful to the Minister for clarifying that point. However, the argument goes that UK History, a BBC Worldwide-Flextech joint venture, pays a certain sum of money for BBC archive material that is used in its programmes and that that is not a commercial sum. The ultimate judge of that situation is the board of governors of the BBC, not an external organisation such as Ofcom.

Kim Howells: I thank the hon. Gentleman for making that point. I was about to make it myself in a slightly different way.
 As a commercial channel, UK History is allowed to compete in the market in the same way as any other channel, but it must compete fairly. As the hon. Gentleman said, there is talk of the price that is being paid for what be might considered the raw materials. Flextech is required to purchase programmes at fair market rates from BBC Worldwide and other distributors and it is not allowed to get programmes free of charge, or to purchase any BBC programme below market price. That situation is regulated by competition law and it is also covered in the BBC's own fair trading agreement. 
 The hon. Member for Maldon and East Chelmsford raised the issue of news coverage. I assure him that if the BBC proposes a reduction in the proportion of news in peak time, or in general, an agreement will require Ofcom approval. The hon. Gentleman also raised the issue of BBC News 24. He rightly pointed out that Richard Lambert was appointed by the Secretary of State to review BBC News 24 and to report to her as part of the review of the original approval of the service. Mr. Lambert's role was entirely consistent with the principle that the approval of new BBC services, and the review of those services under the terms of the Government's public commitment, is a matter for the Secretary of State, who is answerable to Parliament. The BBC News 24 review was not a response to particular concerns about that channel. That was a part of the rolling programme of reviews of BBC digital services that was announced in February 2000 as part of the licence fee settlement.

Michael Fabricant: I am sorry to pursue the point, but I return to it because it is important. I do not personally suggest that programmes were sold at a discount, but let us make one thing clear. There is no set market rate for programmes; one does not have to
 pay so many pounds per minute for a history programme. When one buys shares in a private limited company, the market rate is the price at which the seller decides to sell. Will the Minister tell me who makes the judgment about whether the market rate was paid? The judgment is made by the BBC. Although the market rate was probably paid, I am saying that the argument exists because there is no clear formula. The judgment should be made by an independent third party.

Kim Howells: The hon. Gentleman knows that I have always had a great interest in competition and competition law. If there is a dispute about price, about price fixing, or about a cartel that is operating, it is entirely possible and proper for the parties to approach the Director General of Fair Trading to investigate the situation. I have not heard of such an investigation and I have not heard about injured parties going to the Director General of Fair Trading, but I have heard lots of rumours from people who are a bit cheesed off about the fact that that is a good service. That is a serious point. We have spent much time in discussing competition law and in ensuring that, at long last, we have a competition authority with some teeth. I hope that we will not try to undermine its authority by ensuring that it cannot investigate matters of controversy in the way that I would assume that it would investigate any complaint that was made about purchases from or by the BBC.

John Whittingdale: Does the Minister accept that, although a commercial broadcaster can make a complaint about a potential breach of competition law, which would then be investigated by the Office of Fair Trading, the obligations on the BBC, as placed on it by the fair trading commitment, go beyond competition law? A potential breach of the fair trading commitment might not be a matter for investigation by the competition authorities but, nevertheless, it should be investigated by an outside regulator. At present, it would be a matter for the governors.

Kim Howells: Like the hon. Member for South Cambridgeshire, the hon. Gentleman raises interesting points about the fair trading agreement. If the hon. Gentleman will bear with me for a little while, I will try to deal with those points.
 The Government have undertaken that Ofcom will be consulted on any proposed new public services and on reviews of any such services. However, the formal role that new clause 19 envisages for Ofcom would confuse the responsibilities of the Secretary of State and the regulator. That would strike at the heart of the principle that the Bill should not interfere with the BBC's direct relationship with the Secretary of State and, through her, with Parliament. Given the BBC's status as a publicly funded body, we believe it essential that that relationship be preserved. 
 I will turn to specific amendments and to the points that the hon. Member for Maldon and East Chelmsford has just raised. Amendment No. 22 would allow Ofcom's functions in relation to the BBC to be contained in the BBC charter. However, in practice, the power would not be exercised, as the charter is not the appropriate place in which to set out 
 those provisions. The agreement between the BBC and the Secretary of State, rather than the charter, will set out the obligations on the BBC in respect of which it is intended to give Ofcom a role. 
 Amendment No. 43 seeks to extend Ofcom's functions in relation to the BBC to enforcement of the BBC's fair trading commitment. In accordance with the royal charter, the commitment is currently enforced by the BBC's board of governors. The hon. Gentleman finds that arrangement unsatisfactory. However, amendment No. 43 would give Ofcom the function of enforcing an internal BBC document. That would, of course, be inappropriate. We will therefore resist the amendment. I found myself agreeing with the hon. Member for South Cambridgeshire's comments on amendment No. 43. I agree with his analysis: we should not elevate the fair trading agreement into something that it is not. 
 United Kingdom and European Union competition law applies to the BBC as to other broadcasting organisations. The Bill gives Ofcom concurrent powers with the OFT to apply competition law to broadcasting and related activities. Ofcom's functions in that respect are fully set out in part 5 of the Bill. 
 The BBC's fair trading commitment is there to ensure that commercial activities within the BBC comply with competition law and support the BBC's core purpose as a public service broadcaster. The commitment, along with the BBC's commercial policy guidelines, underpins compliance with the law, but is not a substitute for it. 
 Amendment No. 149 seeks to give Ofcom a duty to consult interested parties in carrying out its functions in relation to the BBC. Although there are some instances, elsewhere in the Bill, where we impose specific obligations on Ofcom to consult, there is no general duty for Ofcom to consult. Imposing a general duty in clause 193 would therefore lead to an inconsistency. Without amendment No. 149, Ofcom would, as a reasonable body, still have the power to consult at any time, and it would be expected to do that when it was appropriate. 
 New clause 18 seeks to apply similar regulatory requirements to the BBC regarding the production of statements of programme policy that are applied to licensed broadcasters under clauses 258 and 260. The proposed new clause includes a new requirement for the BBC to report annually on its own performance against each statement and it would also oblige the BBC to consult Ofcom and take account of its opinions before including in a statement anything that would make a significant change to the character of any service. For that to be achieved, the BBC's agreement would be required to contain provisions along those lines. The new clause would also oblige the BBC to revise, in accordance with Ofcom directions, any statement that appears to Ofcom to have been made in breach of the obligation to consult and take account of its opinions. 
 Clause 5(c) of the published proposals for amending the BBC agreement includes an obligation on the BBC to prepare and publish annually statements of programme policy. Clauses 256 and 344 of the Bill would require the BBC to consider Ofcom guidance and recent Ofcom reports before preparing programme policy statements.

Michael Fabricant: Does the Minister not accept that the word ''consider'' leaves things incredibly open and gives the BBC no protection if people accuse it of rightly, or more probably wrongly, of not having considered an issue fully?

Kim Howells: No.

Michael Fabricant: Why not?

Kim Howells: The basis of our approach is that the BBC should stand within the regulatory regime for licensed broadcasters to the extent that that is consistent with the general principle that is set out in the White Paper. The board of governors should retain responsibility for the delivery of the BBC's remit. The effect of the new clause would, however, be to transfer the authority to approve significant changes to the character of any BBC service to Ofcom. We believe that the BBC agreement should not be amended to include the provisions that are set out in new clause 18.

Andrew Lansley: I am grateful to the Minister, but will he respond to something that I mentioned that some time ago and explain precisely why the wording of paragraph 5(c)(3) of the proposals for amending the agreement does not specifically reflect the wording of clause 258?

Kim Howells: I have only just got into what the hon. Gentleman said, but I will consider that and, if there is a difference, I will try to get back to him. I have not been able to pick up on that since he mentioned it first thing this morning, but I will certainly consider that.

Andrew Robathan: I wonder if, for the record, the Minister will illuminate something that has been bothering me today. Why did we only receive that document late last night? Why does the Minister's letter say that it was not possible to provide it sooner? It is still not finished and it refers to technical matters that still need to be settled. Why could we not have had the document last week, or even earlier, and why should it suddenly be so imminent that it had to be delivered late last night? I received my copy at seven o'clock yesterday evening.

Kim Howells: I can only apologise to the hon. Gentleman and to the Committee for the late delivery of the document. We wanted to ensure that it contained the maximum amount of information and it took a lot of preparing. I hope that, given the new working arrangements in the House, the hon. Gentleman had time to read it.

Andrew Robathan: After 10.30 pm! In fact, after 11 pm!

Kim Howells: I apologise again for the late delivery. We wanted to ensure that that the document contained as much information as possible in order to give the Committee an indication of our thinking.

John Whittingdale: For the record, the Minister has suggested that the new working hours make it easier for the Opposition to scrutinise the business of the Committee. However, a 9 o'clock start makes it harder for us to do that, because it reduces the amount of time that we have to prepare, unless we are prepared to stay up all night. Thank you for your indulgence, Mr. Atkinson.

Kim Howells: I hear the hon. Gentleman's heartfelt plea. If I had known that we would not get past the first set of amendments by the end of the morning session, I would not have been reading at 1 o'clock this morning.
 I turn now to new clause 19, which would bring the process for approving new BBC services within the statutory framework by including provisions in the Bill. Prior to the Secretary of State approving any new BBC service, Ofcom would be required to prepare a report on whether the proposed service satisfied certain objectives. There would also be a duty on Ofcom to review any new BBC service one year after its commencement and periodically after that. I am resisting new clause 19 because it is inappropriate for the procedure for approving new BBC services to be contained in the Bill. The BBC is established by royal charter and, generally speaking, is not regulated by statute. That is a general principle in our policy with regard to the BBC. Notwithstanding the relevant point that was made by the hon. Member for South Cambridgeshire when he said that we should do it now and future-proof it, I remember saying in the paving Bill, which provided for the setting up of Ofcom, that I thought that the proper place for those debates will be at the time of charter renewal. I beg to differ with the hon. Gentleman on that. The requirement to seek the Secretary of State's approval for new services is set out in the royal charter and agreement, and is one of the features that give the BBC its unique position. There is no corresponding provision in the Bill. 
 The procedure used by the Secretary of State in the approval of new BBC services is set out in the Department's published administrative guidelines for public services. Indeed, some of the detail in the new clause is based on those guidelines. I emphasise that Ofcom will have an important role in the approval process for new BBC services. It has been made clear that the Secretary of State will consult formally with Ofcom on any new BBC service proposals and on any reviews of existing BBC services. The Secretary of State has already made a commitment to carry out an independent review of the BBC's new digital services in 2004, in which it is expected that Ofcom will be involved. 
 New clause 29 would give the Secretary of State a Henry VIII power to amend the Bill after it is enacted, when the Secretary of State considers it appropriate to do so in order to give effect to any new BBC charter, licence or agreement. We believe that that change is unnecessary, as the policy relating to the BBC, generally speaking, is set out in the charter and the agreement, rather than the Bill. No amendment of the resulting Act would be necessary in practice to enable the charter or agreement to have effect. In so far as it is 
 the intention of the amendment to enable the current system of regulation of the BBC through charter and agreement to be turned into a statutory regime by incorporating the substance into the Act, I expect Parliament to be given the opportunity to debate fully, in the context of fresh primary legislation, any amendment to the Act that would have such far-reaching effects.

Michael Fabricant: Perhaps the Minister enjoys our debates in Committee.

Andrew Robathan: As we all do.

Michael Fabricant: Indeed. The real reason for rejecting the amendments and the new clauses is because he wants another Ofcom Bill in three or four years' time. Does he not think that there is a real danger of that happening and that the timetable of BBC charters will end up being the tail that wags the dog, in that Parliament will have to introduce a new Bill each time there is a new BBC charter?

Kim Howells: I lost the hon. Gentleman halfway through that. The short answer is no. I am fully aware that many have argued that we should bring the BBC fully under Ofcom. There are strong reasons why we have not done so. We need a regulatory framework that will balance two needs. First, there is a need for the BBC to be independent of Government for the programmes that it makes, but to be accountable to Parliament. That is not easy to arrange. Secondly, there is a need to ensure that the BBC is covered by the same obligations as all other public service broadcasters. The mechanism that we will use to balance those needs is the agreement between the BBC and the Government. Under that agreement, the BBC undertakes to be bound by the same rules as other broadcasters and, for the majority of the provisions in the first two tiers of regulation, to agree its targets and quotas with Ofcom, and to be subject to Ofcom's sanctions if it does not reach them.
 Under the framework provided by the charter, and under the agreement with the Secretary of State for Culture, Media and Sport, the governors are responsible for ensuring that the BBC meets all its statutory and other obligations. That framework protects the BBC's creativity and independence, but also ensures that the BBC is accountable to Parliament. I do not need to remind the Committee that the BBC, unlike the other broadcasters regulated by Ofcom, is spending public money to pursue its goals. We politicians must be able to account for how that public money is spent. There is another broadcasting company, S4C, that spends public money, but we shall come to that subject shortly. 
 What we are proposing preserves the special position of the BBC and its constitutional relationship with Parliament, but also creates a fairer system that treats other public service broadcasters similarly.

John Whittingdale: The Minister has stressed that the governors' role is to act as a watchdog to ensure that the BBC abides by the terms of the agreement. Is he satisfied that the governors have displayed sufficient independence and objectivity to date in dealing with complaints about potential breaches of the agreement?

Kim Howells: I certainly will not trawl through history to find examples where I think that the governors have been either weak or strong. However, some of the recent changes certainly strengthen the role of the governors and their ability to act as a proper regulatory body in relation to the management executive of the BBC. Our proposal will strengthen that further.
 We are not letting the BBC off the hook. The existing core responsibilities of the BBC governors, including the responsibility to uphold and protect the BBC's political and editorial independence, will be retained. However, the BBC will be subject to new external requirements monitored and enforced by Ofcom. It will be subject to the same standards and quotas at tiers 1 and 2 as other public service broadcasters, and Ofcom will be able to fine the BBC if it does not meet its obligations. 
 I hope that I can convince the hon. Member for Maldon and East Chelmsford that the BBC is now a much more modern organisation. Gavyn Davies has responded to criticisms about how the BBC is run and about the fact that it is both judge and jury on its affairs. He introduced a number of reforms in February 2002 that have enhanced the role of the governors in preparation for the new regulatory system, and has given the governors a more clearly defined role from that of the BBC executive. 
 The Government have also had a role in making the BBC a more transparent organisation. The BBC has been open to much more external scrutiny since the licence fee settlement in February 2000, which included a package of reforms on transparency, fair trading and accountability. I am familiar with the criticisms about the BBC in respect of its commercial activities. Indeed, the conditions placed upon approvals for new BBC services, including the approval given last week to the BBC's digital curriculum, show how sensitive the Government are to the need to protect the commercial market from unfair, publicly funded competition. It is important not to confuse issues. The BBC should, and does, try to generate as much income as it can from effective exploitation of its product, and, indeed, the Government have encouraged that. The BBC's own fair trading commitment is sometimes referred to as though it was the only way in which the commercial impact of the BBC could be regulated. That is wrong. The BBC is subject to EU and UK competition law and, as a competition regulator, Ofcom will share with the Office of Fair Trading the economic regulation of the whole sector, including the BBC. 
 The BBC's own fair trading rules go beyond the protections of the law, and it is right that the governors, who drew up the rules in the first place, should oversee them. In the light of that, and before my voice gives out, I hope that the amendment will be withdrawn.

Andrew Lansley: I am grateful to the Minister for testing his voice to its limits in order to respond to a wide-ranging, informed and constructive debate.
 May I pick up two points? The first relates to the fair trading commitment and the oversight of the BBC relating to competition powers. I commend paragraphs 212 to 215 of the Joint Committee's report to anybody who has not read them, although I shall not rehearse them at length. They represent nothing that is inconsistent with the Government's understanding of the application of competition powers to the BBC. The Minister and I are as one in believing that the fair trading commitment is the BBC governors' own document. However, that does not mean that asserting that the BBC is subject to EU and UK competition powers and authorities is sufficient because the report sets out that the way in which competition powers are applied to an undertaking that has substantial public service obligations is particularly complex. 
 The BBC, as an undertaking, is able to behave in a way that would not be possible if it were a properly commercial operation, but only to the extent justified by its public service obligations. The clarity with which those obligations are spelled out is instrumental to competition authorities' ability to undertake scrutiny. That is why Derek Morris from the Competition Commission made it clear when he came to see us that he would find greater clarity helpful. That brings us back to the question of the inconsistency of the way in which public service obligations throughout the ecology of public service broadcasting will be managed. They will not be managed by Ofcom alone. Ofcom will manage public service broadcasters other than the BBC. However, obligations will be established by the BBC governors and the Government under the royal charter. BBC governors will interpret them and Ofcom will scrutinise and report. There is scope for substantial discontinuity if the two organisations do not work with sufficient co-operation. 
 That brings me back to amendment No. 22. I understood the Government's argument to be that the amendment will not do because the charter is not the appropriate place. I am loathed to accept the word ''appropriate''. The royal charter is a competent place to spell out the functions of Ofcom in relation to the BBC. There is no constitutional bar to doing that in exactly the same way that the Secretary of State's functions in relation to the BBC are established in the royal charter. There is a risk that if we went down that route, the way in which the charter is renewed could lead to circumstances in which the BBC believed that the agreement was inconsistent with the charter. 
 We have not dwelt on the fact that the agreement is agreed with the BBC, and not simply mandated to the BBC. If we leave it open for the BBC to interpret the charter in an agreement with the Government in order to determine the extent to which it is subject to Ofcom, that might not be 100 per cent. on all fours with the intentions of Parliament and the interpretation of the Government. If it were necessary for Ofcom to undertake substantive functions in relation to the BBC at charter renewal, such as giving Ofcom responsibility for the approval or review of services, it would be more competent if that were in the charter, not the agreement. 
 It is better to future-proof the legislation by acknowledging the possibility that Ofcom would have functions by specifying them in the charter than for them to have to be set out subsequently in the agreement. That is not to say that amendment No. 22 is intended to place the BBC wholly under Ofcom or to diminish the accountability of its governors to Parliament for the exercise of the licence fee. I shall not dwell on that again because you, Mr. Atkinson, would rule me out of order if I were to do so, but the point of my diversion into the future use of the licence fee was to make it clear that it is possible that Ofcom would have functions in relation to the BBC that are consistent with its functions in relation to other public service broadcasters, but that the BBC board of governors would continue to have the sole responsibility for the dispersal of the licence fee, and for accounting for the proper use of it in purchasing public service obligations. 
 Although I have great respect for the way in which the Minister tried to answer the debate, I regret to say that he has not satisfactorily responded to the reasons why amendment No. 22 was tabled, and the desirability of having the flexibility in future to incorporate Ofcom's functions directly into the royal charter, and to bear on the BBC in that way. Therefore, I wish to press the amendment to a Division. 
 Question put, That the amendment be made:—
The Committee divided: Ayes 5, Noes 16.

Question accordingly negatived.

Andrew Robathan: On a point of order, Mr. Atkinson. I wish to draw your attention to an extraordinary situation: we could easily by now have reached and passed clause 228, and yet earlier on Government amendments that were dated today were delivered to me and other hon. Members, one of which relates to clause 228. Is that not extraordinary, Mr. Atkinson, as you could not possibly have selected that amendment if we had reached clause 228 by then?

Peter Atkinson: Whether amendments are tabled by the Government or the Opposition is not a matter for the Chair, and the speed at which the Committee operates is up to the Committee—and after this morning's performance the chances of us reaching clause 228 are very slim.

Andrew Lansley: I beg to move amendment No. 301, in
clause 193, page 171, leave out lines 30 and 31 and insert— 
 (a) required by OFCOM; and 
 (b) proportionate to the costs incurred by OFCOM in relation to the exercise of its functions in relation to the BBC; or 
 (c) such other sums as the Secretary of State may determine, on an application by the BBC.'.
 We will surprise you now, Mr. Atkinson, by being brisk. The purpose of amendment No. 301 is straightforward. As subsection (4) is currently structured, the payments to Ofcom by the BBC in respect of its functions relating to the BBC are left as a matter for agreement. The amendment devises a new payment structure that is more similar to that which would apply between Ofcom and other public service broadcasters. Its second paragraph states that Ofcom can require the payment of sums that are 
''proportionate to the costs incurred by OFCOM in relation to the exercise of its functions in relation to the BBC''.
 Therefore, that is cost-related, and instead of requiring there to be an agreement with the BBC, leaving it that if the BBC has a dispute over the matter, it can take it to the Secretary of State. The amendment is pretty straightforward. Such matters need to be specified in the Bill and the amendment would ensure that the procedure is specified more accurately.

Kim Howells: I will also be brief. The amendment is unnecessary. The existing wording will have the same practical effect, but in terms that accord better with the general approach taken by the clause. It leaves the amount to be settled by agreement between the BBC and Ofcom. Clearly, Ofcom will have no incentive to charge the BBC less than a proportionate amount and, if the BBC considers that it is being charged more than that, it can ask the Secretary of State to fix the amount. In doing so, the Secretary of State would look to fix a fair and reasonable sum that is proportionate to the costs that Ofcom incurs in performing its BBC-related functions.

Andrew Lansley: As I suspected, the way in which measure will work is exactly in line with amendment No. 301, but propose not to set it out in the way that we prescribe. I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn.

Andrew Lansley: I beg to move amendment No. 302, in
clause 193, page 171, line 31, at end insert— 
 '(4A) It shall be the duty of the BBC to provide OFCOM with any information which OFCOM may reasonably require for the purposes of carrying out their functions under the agreement mentioned in subsection (1)(a) or other functions under this Act.'.
 We are dealing with the supply of information, which is a slightly different theoretical point from the previous amendment. It is not set out in the Bill, but comprised within the amendments to the agreement that were supplied to us yesterday. I do not dispute that the way in which the agreement is structured will place the same duty on the BBC to furnish information to Ofcom. My problem is that, when we are clear that that is a requirement on the BBC that flows directly from the provisions of clause 193, it is better to set it out in the clause and place that duty on the BBC in specific terms, not leave it to be set out in the agreement. The amendment is simple, and I hope that the Minister may incline towards it.

Michael Fabricant: I support the amendment. It is important that the BBC is perceived to be co-operating with Ofcom, particularly in the light of the Government's stubborn refusal to accept the recommendations, amendments and new clauses that we debated earlier. Gavyn Davies and Greg Dyke are good news for the BBC. I applaud their attempts. I am not looking for a consultancy, but there is definitely a change in ethos from when John Birt was at the BBC. It is a matter of perception. The Bill is not explicit, although the obligations may be implicit on the BBC to provide information. However, the amendment would make it clear to third parties that it is obliged to co-operate in every way with Ofcom.

Kim Howells: We recognise the need for Ofcom to have all the information that it requires to carry out its function in respect of the BBC. A clause will therefore be inserted into the revised agreement to place a general duty on the BBC to co-operate with Ofcom and to furnish it with any information that it may reasonably require in connection with its functions under the clause. I am referring to clause 13A of the proposals attached to my letter to members of the Committee. I hope that they have read it. It is in line with the general principle that regulation of the BBC will be set our in the agreement. It recognises the BBC's distinctive constitution and preserves its special relationship with Parliament.

Andrew Lansley: I shall not press the amendment to a Division. It would be better if it were accepted, however. If the Government consider it, they may realise that provisions in the Bill, such as penalty provisions, could otherwise have been in the agreement. The question of where to draw the line is a matter of judgment.
 It would be better if some of the basic provisions needed to support clause 193 were included in that clause rather than elsewhere or in the agreement. However, I will not press the matter and beg to ask leave to withdraw the amendment. 
 Amendment, by leave, withdrawn. 
 Clause 193 ordered to stand part of the Bill.

Clause 194 - Functions of C4C

Question proposed, That the clause stand part of the Bill.

John Whittingdale: We should pause for a moment to examine Channel 4, because it is obviously another major player in the broadcasting environment. Channel 4 has always attracted controversy. It was created by a Conservative Government to provide more choice for viewers, and in particular, to cater for minority audiences who might not otherwise be provided for by the existing three terrestrial channels. It is just over 20 years since Channel 4 went on air, and in most of that time it has fulfilled its remit very successfully.

Michael Fabricant: Does my hon. Friend recall that when Channel 4 was established, there was originally a levy on ITV to help subsidise the new channel, because
 it was generally assumed that it would be a loss-making operation? The reverse has proved to be true. Will my hon. Friend join me in congratulating Michael Grade, who sadly is no longer working in television, on achieving that success?

John Whittingdale: I will join my hon. Friend in congratulating Michael Grade. Many hon. Members will recall that one of the sections in the Broadcasting Act 1996 removed the obligation for funding arrangements for Channel 4. As my hon. Friend said, there had previously been a provision in law whereby it appeared that Channel 4 would be able to receive money from the ITV companies. However, the new channel proved so successful that the reverse occurred and Channel 4 found itself paying money to the ITV companies instead of receiving it. There was a great deal of lobbying from Channel 4 at the time claiming that the provision was unfair, so the matter was dealt with in the 1996 Bill.
 Although Channel 4 was commercially successful and profitable during the 1990s, it also succeeded in meeting its remit of providing for minority audiences. In doing so, it was bound to attract controversy and sometimes get things wrong. Channel 4 has a history of showing controversial programmes that have attracted criticism—sometimes in tabloid newspapers. Hon. Members may recall programmes such as ''The Tube'', ''The Word'' and so forth over the past 20 years. 
 At the same time, there have been many innovative programmes that have extended choice and have been generally welcomed. I will mention only a few—Alan Bleasdale's ''GBH'', Dennis Potter's ''Lipstick on Your Collar'' and ''Traffic'', which has now been made into an extremely successful Hollywood film.

Kim Howells: And cricket.

John Whittingdale: The Minister reminds me of the extremely important contribution made by Channel 4 to the televising of cricket. Michael Grade was responsible for many excellent programmes.
 In the main, I have resisted the temptation to attack Channel 4 for specific programme decisions. With a remit to cater for minority audiences, there will always be some controversy, and most of the time, Channel 4 has taken brave decisions. Although I have not always liked some of the programmes made, that is not a reason for not screening them. The programme that attracted the most controversy in recent times was the edition of ''Brass Eye'' on paedophilia, which led to a huge number of complaints—not least from hon. Members who found themselves on the programme without having been told that it was satirical and not a documentary. I was not entirely happy about the programme, and it was of course condemned fairly vigorously by the ITC. However, that is not to say that Channel 4 was wrong to commission the programme. ''Brass Eye'' broke a lot of new ground in satirical current affairs and I would not say that that particular edition should not have been screened. 
 In the past few weeks, Channel 4 has sent me a video of ''The Autopsy'' because I was not able to see the original transmission. That programme attracted a lot of controversy in the tabloids, because when it was 
 screened there was a question mark over whether Channel 4 was participating in an illegal act. I was therefore not wholly happy with the decision to screen. I have now watched the programme, and although it was fairly distasteful in parts, it was not as sensational as I had feared. Indeed, in some respects it was positively tedious. Nevertheless, the decision to screen the programme was always going to provoke controversy. 
 Most recently, Channel 4 showed a Chinese performance artist eating a baby. That was clearly going to appal a large number of people. Nevertheless, if this was happening in China, it is arguable that Channel 4 was performing a public service in drawing attention to the extraordinarily tasteless idea of entertainment that some people seem to have in China.

Michael Fabricant: Does my hon. Friend agree that one of the roles of public service broadcasters is to innovate? Sometimes, when a broadcaster innovates it has to take risks. It will not always get things right but it is nevertheless to be commended for its innovations.

Peter Atkinson: Order. Before the hon. Gentleman rises to answer that point, I point out to hon. Members that we are beginning to debate specific examples rather than the functions of Channel 4. I ask the hon. Gentleman to bear that in mind.

John Whittingdale: I will bear that in mind; I have nearly exhausted my examples.
 I agree strongly with the point that my hon. Friend raises. When tempted by tabloid newspapers to react vigorously and condemn Channel 4 for some of its programming decisions, I have resisted the temptation when possible—first, because I do not like to condemn a programme until I have seen it, and, secondly, because I feel that Channel 4 has a duty to be controversial and sometimes to upset people. If people are upset they can hit the off button, or at least turn over to another channel.

Simon Thomas: The hon. Gentleman may have given a false impression. He described the Chinese performance as ''entertainment'' but I think that Channel 4 described it as ''modern art''. The hon. Gentleman may want to put that point to the Minister later.

John Whittingdale: That is an interesting distinction, which the Minister is well qualified to address—I look forward to hearing him. Channel 4 screened that programme as a documentary. It was designed to draw attention to what may best be described as cultural differences. In China the endeavour was apparently regarded as artistic but was also, I presume, designed to entertain.
 Much of Channel 4's success has rested on its finding and bringing to the attention of viewers in this country some of the most successful American examples of drama and comedy. Comedy programmes include shows such as ''Frasier'', ''Seinfeld'' and ''Friends''. The Minister has rightly drawn attention to ''The West Wing''. The proportion of viewers for that show may be higher in the House of Commons than in the country at large, but it is nevertheless a brilliant example of extremely good 
 American drama. Another example is ''Malcolm in the Middle''. ''Six Feet Under'' is the latest import, and that too is innovative. We will discuss later the merits of American television in relation to British television. Nevertheless, Channel 4 has demonstrated that American television can be of a high quality. 
 On the role of Ofcom, and in respect of Channel 4 and its proposed functions, the Bill restates the original purposes of Channel 4 and especially its remit to cater for minority audiences. I am seeking to press that point. Channel 4 performed that function successfully for a long time and it was able to meet its remit and return a profit. In the last couple of years, however, things have gone badly wrong. 
 It is worth contrasting the following facts. In 1996, the year in which we had a debate on Channel 4 during the progress of what became Broadcasting Act 1996, Channel 4 made a profit of £134 million on a turnover of around £500 million. Last year, however, Channel 4 made a loss of £28 million on a turnover of £700 million. During the past six years there has been a staggering deterioration in Channel 4's profitability. The new chief executive is rightly seeking to address that issue, and he has taken some difficult decisions. He will have found on his arrival that there had been an enormous increase in staffing numbers. 
 It is worth contrasting the following: Channel 4 originally employed 600 staff and commanded some 10 per cent. of the television market; that market share has not increased, but the number of people working for Channel 4 has doubled to around 1,200 staff. In order to improve efficiency, which has eroded, the new chief executive has had to cut some jobs. 
 My hon. Friend the Member for Lichfield referred to the fact that Channel 4 had, when it was profitable, previously paid ITV under the old funding formula. That formula was removed in 1996 and some would argue that as a consequence, Channel 4 found itself with a lot more money and decided to extend into other services. That context is central to clause 194, which gives Ofcom a role in looking at other services that Channel 4 provides and at other functions that go beyond its provision of the service that we know and love.

Michael Fabricant: Does my hon. Friend not share my perplexity at the lack of symmetry in the Bill? Channel 4 is a publicly owned body, but unlike the BBC, it is responsible to Ofcom.

John Whittingdale: Channel 4 and the BBC are slightly different creatures, but I agree with my hon. Friend. It is curious that the state-owned minnow in the pool should be subject to regulation by Ofcom, whereas the state-owned shark is outside that. My hon. Friend makes a good point.
 I want to touch briefly on what Channel 4 has done in the past few years to extend the scale of its activities, especially in moving into new channels and online activities. The previous chief executive of Channel 4 is quoted in the 2000 annual report as saying: 
'' 'If we are to maintain our salience in that fast-growing multi-channel environment and bring the values of innovative culturally diverse programming to a new generation of viewers who, to a great extent, are passing traditional public service broadcasting by, then 
we not only need to invest to maintain the quality of the main channel but we also have to extend the range and quality of what we offer.' ''
 That was his justification for Channel 4's spending much of the extra resources that suddenly became available on E4, the new digital version of Channel 4, FilmFour and on Channel 4 Interactive. 
 On the financial performance of Channel 4, the main Channel 4 terrestrial channel made a profit of £36 million last year. What went horribly wrong was that the digital activities grouped into what is called 4 Ventures lost £65 million. The overall effect was that, according to the earnings for interest and tax, Channel 4 slipped from being £34 million in the black in 2000 to being £28 million in the red in 2001. The majority of those losses came from three activities: the satellite channel E4, which recorded an operating loss of £37 million; Channel 4 Interactive, which lost £14 million; and the FilmFour channels, which lost £11 million. 
 {**1**}Those three activities are used by comparatively few people. Very few people log on to 4 Interactive. Similarly, FilmFour has a relatively small number of subscribers. Even E4 does not perform well most of the time. In the viewing figures for the past two years, there are three big spikes when the numbers of viewers of E4 jump—in August 2000, August 2001 and, roughly, August 2002. What was shown on E4 in those periods was ''Little Brother'', the programme associated with ''Big Brother''. It appears that E4's success is driven by the fact that it is able to offer more time to those who wish to watch ''Big Brother''. Indeed, it had 24-hour coverage. 
 I am told that some people watch E4 to see the residents of the house asleep. I once found myself doing so, and I could not believe that time on television was being spent broadcasting six people asleep in bed. I thought that something must have been about to happen, so I stayed viewing. To my great disappointment, absolutely nothing happened. ''Big Brother'' attracted huge controversy but has been a fantastic success, and was groundbreaking television when it was first shown. Its novelty value might have worn off somewhat but, extraordinarily, the most recent series of ''Big Brother'', ''Big Brother 3'', recorded the highest viewing figures yet. Some 7 million people watched as the final eviction approached. I do not criticise ''Big Brother''—although whether it was a welcome development in British television is debateable. Channel 4 was prepared to take the risk when many people did not think that ''Big Brother'' would work, and it proved to be an extremely successful decision.

Richard Allan: The hon. Gentleman has stressed the idea of risk taking several times, and one of the key features of Channel 4 is that it is a public corporation that can take risks. My understanding of Conservative policy was that the Conservatives wanted to privatise Channel 4 and put it entirely into the private sector. Will the hon. Gentleman clarify that point, so that we can
 understand where he is coming from with regard to Channel 4?

John Whittingdale: The hon. Gentleman is right. Six years ago I tabled an amendment to the 1996 Broadcasting Bill to privatise Channel 4. I remain of the view that at that time, there was no reason why a successful privatisation could not have been achieved. Channel 4 was clearly demonstrating that it was possible to meet its remit and be profitable at the same time. On that basis, I thought there was no reason why it should not be privatised. Sadly, as I have described, circumstances have changed. If we were to privatise Channel 4 now, I am not sure that there would be a huge queue of buyers. Certainly, privatisation of Channel 4 is not something to which I would attach particular priority now. Circumstances may change, but the jury is out at the moment.

Michael Fabricant: Will my hon. Friend confirm that under clause 194, as was the case under the old Independent Television Commission, the programme requirements will remain the same no matter who owns Channel 4?

John Whittingdale: That is absolutely clear. The raison d'être of Channel 4 is its remit to cater for minority audiences, and I strongly support the continuation of that, whatever the ownership structure. However, that is not a debate for today.
 I have described why Channel 4 has found itself in financial difficulties compared with the much better situation of four or five years ago. Those difficulties are attributable to the decision to provide additional services—in particular, digital channels and interactive services. Under clause 194, those activities will be subject to scrutiny by Ofcom. Ofcom will be asked to consider whether those activities are affecting the performance of the main channel. It is certainly arguable that they are, because they are making Channel 4 a loss-making corporation. That clearly has knock-on effects on programme budgets and other facets of the main channel. Is the Minister happy that Channel 4 has branched out as it has? Does he foresee Ofcom taking any particular interest in those other activities when it takes on its new responsibilities?

Richard Allan: I wish to raise a couple of issues to do with clause 194 and the functions of the Channel 4 Corporation. What I say will follow on from the comments of the hon. Member for Maldon and East Chelmsford. I echo his praise of Channel 4, which has demonstrated the strength of the public service broadcasting ethos in the UK. We do not have bland television. Many places end up with bland television because they have an entirely deregulated market without the positive regulation—if I may put it that way—that exists when there is a public service remit. In those places, the tendency is towards a middle ground that is meaningless and blancmange-like. In some countries, I have sat through the output of 20 bland channels—and it tends to be the mainstream channels that end up that way. Channel 4 has certainly bucked that trend.
 I shared some of the disquiet about ''The Autopsy'' and I used the off button, which is my censor's mechanism. Having said that, I am too squeamish to 
 watch ''Casualty'', so watching an autopsy was completely out of the question.

Chris Bryant: What about ''Scrubs''?

Richard Allan: ''Scrubs'' is all right because it is about people, and those people do not get cut up. As long as there is no blood, I am okay.
 The proposed new sub-paragraph 4 of paragraph 1 of schedule 3 to the Broadcasting Act 1990, as laid out in clause 194 of this Bill, seeks to put into the 1990 Act the deregulatory advances that have been made in respect of Channel 4. It will do so by giving Channel 4 the power 
''to borrow money'',
''to carry on activities . . . through Channel 4 companies''
 and 
''to participate with others in the carrying on of any such activities''.
 That makes flesh in the legislation what has happened as Channel 4 has evolved. It has become like any other corporation and will borrow money and enter into all kinds of commercial agreements. 
 The hon. Member for Maldon and East Chelmsford mentioned FilmFour. There is the FilmFour that provides pay television channels, but there is also the FilmFour film production company, which has produced some of the best films that I have seen in years. I often watch a film, think it brilliant, and then see the FilmFour name at the end. A lot of its film production has been in the regions and nations of the United Kingdom, rather than being simply London-centric. FilmFour has been a very important company in breaking away from the Hollywood model, and what I might call the Elstree model—the London-centric notion of film production. FilmFour has done us proud. 
 I would like to explore with the Minister the relationship that will exist between the Channel 4 Corporation—I can see that the intention is to give it a fair degree of latitude—Ofcom as the regulator, and the Government. As we will see in clause 197, the Government must approve any borrowing by Channel 4. The scope of activities permitted under the clause will depend on Channel 4's finances, which may well depend on borrowing. 
 The hon. Member for Maldon and East Chelmsford referred to losses made through digital services. Anybody who set up a digital service made losses during its first few years. The usual business model is to borrow against an expectation of future profits. 
 There are two potential checks on the Channel 4 Corporation operating its powers under the clause. The first check will be whether Ofcom considers that C4C's proposals are permitted in the regulated framework and the second check will be whether the corporation can get the Government's borrowing approval to access the cash that it needs. There is a three-way decision-making process. Will the Minister tell us how the Government intend the Channel 4 Corporation to work within the remit of the clause and subsequent clauses? How will the decision-making process work? Will he tell us how confident he is that ventures such as FilmFour, especially, can continue to be successful?

Kim Howells: I shall be brief, because I know that there is a lot of business that we have not dealt with. The clause sets out the ancillary functions of the Channel 4 Corporation.
 The purpose of the clause and of schedule 9, which the clause introduces, is to modify C4C's powers and to ensure that all its ancillary activities are appropriate, connected with its primary functions and not unfairly subsidised. C4C's primary functions are defined as securing the continuing provision of Channel 4 and the fulfilment of the public service remit for that channel as set out in clause 257. 
 I agree with points that were made about the great asset that Channel 4 is to this country. It undertakes brave programme making and contributes to the film industry. Our film and television industries are further apart than those in any other advanced nation. That is a shame, and Channel 4 made real efforts to bring the two disciplines together, which it sometimes did successfully. There are many reasons why its great venture failed to a certain extent, but I am glad that Channel 4 continues with a reduced film-making venture at the moment. 
 We want C4C to remain free to undertake other activities, including such new ventures as E4 and FilmFour, if it is satisfied that there is a sufficient nexus with the primary functions. The clause allows Channel 4 to carry out any activities that appear appropriate in association with carrying out its primary functions and connected, other than in mere financial terms, with activities undertaken by it for the carrying out of those functions. 
 In order to reinforce the point that activities must have a nexus with the primary functions, we are removing Channel 4's existing free-standing powers in relation to qualifying companies. Channel 4 will, however, remain able to carry out activities through Channel 4 companies and to participate with others in carrying out any such activities, if they meet the other requirements of the clause. 
 The provisions will protect Channel 4's primary functions while ensuring that it has the flexibility to adapt and develop in response to a changing broadcasting economy. 
 Question put and agreed to. 
 Clause 194 ordered to stand part of the Bill. 
 Schedule 9 agreed to. 
 Clauses 195 and 196 ordered to stand part of the Bill.

Clause 197 - Borrowing limit for C4C

Question proposed, That the clause stand part of the Bill.

John Whittingdale: I shall be brief. Can the Minister explain why it is necessary to include clause 197? Although Channel 4 is a statutory corporation, it has always operated in the commercial marketplace and it has no public funding. Throughout its 20-year history, it has been able to borrow from the banks on a straightforward commercial basis whenever that has been necessary. The clauses that we have just approved
 put in place some safeguards to ensure that Channel 4 does not abuse its position, but it is not clear to me—or to Channel 4, I think—why it is necessary for the Bill suddenly to impose a borrowing a limit on it.

Michael Fabricant: Will my hon. Friend give way, before he finishes his speech and sits down?

John Whittingdale: I am halfway down already, but yes.

Michael Fabricant: My hon. Friend saves me from having to make what would have been a very brief speech. Does he not agree that there is also a slight risk that if the Government set the spending limits—[Interruption.] The Division Bell is ringing. What shall I do?

Peter Atkinson: As there is a Division in the House of Commons, I suspend the Committee for 15 minutes. If there are two Divisions, I will suspend it for half an hour.
 Sitting suspended for a Division in the House. 
 On resuming

Michael Fabricant: I shall begin at the beginning, Mr. Atkinson, with your indulgence.
 Does my hon. Friend the Member for Maldon and East Chelmsford agree that, if the Government set spending limits—and I agree that such limits may not be necessary because of provisions in the foregoing clauses—there is a danger that Channel 4 will not have the freedom to invest in digital or other projects that it might otherwise have?

John Whittingdale: Obviously, that will depend on the level at which the borrowing limit is set. Theoretically, it is possible. At this stage, my contribution to the debate is in the spirit of inquiry. Why is it necessary to impose a borrowing limit?

Andrew Lansley: I rise to share with my hon. Friend the Member for Maldon and East Chelmsford my perplexity at the Government's move in this direction. Elsewhere, the public sector is moving, if one can describe it as such, towards the deregulation of borrowing powers. Local authorities and national health hospitals are moving towards less constraint on their borrowing. However, they are in the public sector and C4C is not. Although it is a state-owned corporation, it is a private sector body behaving in a commercial way.
 I am not sure that I agree with the hon. Member for Sheffield, Hallam (Mr. Allan) who linked clause 197 to clause 194. Although the amendments to schedule 3 of the Broadcasting Act 1990 include a reference to borrowing money, that is not a new reference. Schedule 3 already allowed the corporation 
''to do things incidental or conducive to''
 the discharging of its functions including the borrowing of money, although it may be construed that that power allows the borrowing of money to do 
 things beyond its primary functions. That is not necessarily true. 
 Channel 4 already had the power to borrow money without the consent of the Secretary of State—or, presumably, the approval of the Treasury. Curiously, it does now. That is inherently undesirable, not because the level set would necessarily represent a considerable constraint on Channel 4—that would not be the Government's intention—but, if the Government set a borrowing limit, the markets may hold that the Government are standing behind that level of borrowing, which is clearly not their intention. 
 The Government should set borrowing limits only when the Government have an implied responsibility for that level of borrowing and for the prudence of the borrowing undertaken by a body. That is not the Government's responsibility in this case. Technically, the clause represents the introduction of a new regulatory burden on Channel 4, which is inherently undesirable, if it has any effect at all.

Kim Howells: The clause allows the Secretary of State to provide by order for a limit on the borrowing that C4C are allowed to take. Channel 4 must not borrow money if the effect of that would cause the amount of its outstanding borrowing to be, or remain, in excess of the prescribed limit. It is right for the Government to ensure that Channel 4's financial arrangements are within some overall constraints. The treatment of Channel 4 is consistent with the treatment of other public bodies. The setting of a borrowing limit is a proportionate and flexible alternative to the existing financial safeguard—a power under section 27 of the Broadcasting Act 1990 for the Secretary of State to give directions to Channel 4 about the use of the reserve fund, including requiring the whole or part of it to be paid into the consolidated fund, which clause 196 will repeal.
 The measure is prudential. It is not intended to compromise the independence of Channel 4 or how it operates. Channel 4 has been fully consulted in determining the level of the limit, which will be £200 million—well above Channel 4's existing level of borrowing—and will continue to be consulted in preparing the order. We believe that that is a proper thing to do. 
 Question put and agreed to. 
 Clause 197 ordered to stand part of the Bill.

Peter Atkinson: Before we move on to clause 198, I wish to say that, for the convenience of the Committee on the next two sections, the first being on Welsh matters and the second on Gaelic matters, I will allow a wider than normal debate on the first clause so that members of the Committee can contribute. For subsequent clauses, I shall be more draconian in making sure that hon. Members remain within order. If that suits the Committee, it will help the debate.

Clause 198 - Function of OFCOM in relation to the Welsh authority

Question proposed, That the clause stand part of the Bill.

Huw Irranca-Davies: I will not detain the Committee for long, as there are other important debates to be had, not least that of my hon. Friend the Member for Western Isles (Mr. MacDonald). I hope some of my words about S4C and Welsh language provision will be of inspiration when it comes to his amendment, too. It goes without saying that the importance of S4C is recognised within the clauses. Last year—a highly successful year—when it celebrated its 20th anniversary, it had more than 700,000 viewers per week on average. Clause 199(2) states:
''The Welsh Authority shall have the function of providing television programme services of high quality with a view to their being available for reception wholly or mainly by members of the public in Wales.''
 Part of the purpose of my speech is to seek the Minister's guidance and reaffirmation of the interpretation of the clauses. The interpretation is that S4C is primarily serving the people of Wales. There is also a large population outside Wales that demands its services, including the provision of facilities such as the internet to the Welsh diaspora. It is not as well established as that of my Scottish colleagues, but nevertheless is significant.

Michael Fabricant: The hon. Gentleman may be wrong about that. I was walking in southern Chile this summer and I came across a Chilean citizen who spoke fluent Welsh. I was up a mountain at the time.

Huw Irranca-Davies: I am pleased to note the hon. Gentleman's observation; perhaps it is the exception that proves the rule and there are many more of us out there.
 Clause 199, together with clause 200, which is entitled ''Powers to provide other services'', provide a flexibility under discussion and order by the Secretary of State to extend the penetration of the Welsh language public service broadcasting. I emphasise public service broadcasting, because an important aspect of the clauses is S4C's function as a public service provider in line with that provided by the BBC. Clause 200 also allows the provision of complementary services, such as extending the internet provision or whatever other technology comes along. The importance of the clause is that it allows S4C to plan ahead for new developments in technology and new ways in which to reach its target audience, which I hope will be ever expanding and will be increasingly inventive. It is an empowering clause and I should welcome the Minister's thoughts on it. 
 Clauses 200 and 201 together allow S4C to continue its excellent work in providing an international showcase for top-quality Welsh language production. The Minister has already alluded to the fine work that has been done by Channel 4 in film and television. S4C also leads the way in the showcase in Welsh language production. Welsh actors, directors and producers 
 overseas still recognise that S4C spends 95p of every pound in Wales on home-grown talent. 
 On 24 January, the Welsh language film ''Eldra'' will open in Los Angeles, promoted by the American Academy of Film and Television in recognition of its worth. We sometimes underestimate what we do in our own backyard. S4C productions have had more Academy nominations than Sean Connery—[Hon. Members: ''Hear, hear!'']—and I say that with much respect to my Scottish colleagues. I have touched a sympathetic note. Given that the primary focus of S4C will continue to be the audience in Wales, I invite the Minister to comment on the fact that the Welsh-speaking audience is big in Wales. That may be the main audience, but it is becoming increasing national in the United Kingdom and international. The clause will enable S4C to reach out to that audience.

Michael Fabricant: Not long ago, I saw a S4C film that had been made in Welsh, Yiddish and English. Does the hon. Gentleman agree that producing films in Welsh encourages the growth of the Welsh language in Wales as well as among the Welsh community in Patagonia?

Huw Irranca-Davies: Yes, I do agree. As one who, over 30 years, has never kicked the habit of trying to learn Welsh, I welcome such comments. I have not tried to learn Yiddish, yet.
 The discussions about funding of the S4C's effort to reach its core target audience and to extend it will continue. It is for S4C to put its case, as it strongly does. Clause 202 enables S4C to argue the merits with the Secretary of State over time. Indeed, it allows for funding above the retail price index to be granted if the right hon. Lady sees fit and if appropriate arguments are advanced. That additional clarification is welcome. 
 Clauses 199 and 200 apply good common sense to the existing provision of S4C2. Under current legislation, S4C2 has wall-to-wall coverage of the proceedings of the National Assembly of Wales. In legislative terms, that is regarded as a commercial venture. The Assembly may be many things and riveting to hon. Members and many people at home, but to describe it as a commercial venture is stretching the bounds of possibility. Clause 199(5) and clause 200(3) recognise the nature of S4C and S4C2 as public service deliverers. I would feel more comfortable as we watch it on monitors in the parliamentary estate and I thoroughly recommend it to my colleagues. There may not be a great take-up at the moment, but I still recommend it. 
 I may wish to return later to other aspects of S4C coverage, but clauses 198 to 203 make a genuine attempt to create an appropriate balance between accountability and flexibility. We must recognise the public service ethos of S4C and put it on a similar standing to the BBC. That is to be applauded. I invite my hon. Friend to confirm my interpretation of the clauses and the importance of S4C or, alternatively, to disabuse me of my errors of interpretation.

Simon Thomas: Before I speak in more general terms—as you have guided us to do, Mr. Atkinson—I wish to ask the Minister to say a little about clause 198 when he replies to the debate. That clause is
 entitled, ''Function of OFCOM in relation to the Welsh Authority''—that is to say, to S4C. I understand that the clause is intended to establish that the relationship between S4C and Ofcom is similar to that between the BBC and Ofcom, and I am thankful that no amendments have been tabled that are designed to change that relationship. However, I would like the Minister to confirm that that is the clause's intention—or to elaborate on that—so that the Committee can have a better understanding of how this public service broadcaster will fit into the Ofcom regulation.
 As the hon. Member for Ogmore (Huw Irranca-Davies) said, the other clauses on the Welsh authority—clause 199 and so forth—put S4C on a better footing to meet its new challenges. It is 20 years old. Some of us remember the first night that it was broadcast: I was sitting in the hall of residence at Aberystwyth university, where hundreds of students had gathered around one small television screen, such was the impact of having a television channel in our chosen language for the first time—that is why I sympathise with some of the later amendments on Scotland. This has been a long time coming, and it has made a big difference in Wales.

Chris Bryant: There are four Welsh Committee members, and we might hear from all of them on this subject.
 As the hon. Gentleman knows, many people in Wales would rather have Channel 4 than S4C—or, at least, they would like to have both channels—because Welsh is not their preferred language. That is the issue about which I receive the most letters. What would he suggest to those people in Wales?

Simon Thomas: I take issue with the hon. Gentleman in one respect. I come from the Cynon valley, which is next to the Rhondda valley—as he knows—and I come from a non-Welsh-speaking background. My knowledge of the people in south Wales leads me to believe that they would not rather have Channel 4 if that were to lead to the demise of S4C, but I agree that they would like to have a choice. In the context of the framework of this Bill, we are discussing how that choice will be delivered—and that is what digital broadcasting is increasingly delivering.
 The hon. Gentleman will undoubtedly be unhappy with the access to satellite or cable in the Rhondda valley, just as I am unhappy with it in my constituency, but that is the reality of what is facing us. He will also appreciate that the English speaking people in Wales have not so far had a unique television channel dedicated to their needs, but that that is increasingly being made available on digital by BBC Choice—and by BBC 2W in Wales. Moves are afoot that are improving the lot of English speakers in Wales, as well as that of Welsh speakers. 
 I want the even-handed approach that has been adopted so far to continue, with support from all parties, from the Conservatives—although they had to be persuaded a little bit to establish S4C, having 
 turned back on their original manifesto commitment—to the present Government that have put forward these new clauses that improve the position of S4C and to any incoming Government in the Welsh Assembly, which I hope will work with the economic structure of which S4C is now a part. Before the hon. Member for Rhondda (Mr. Bryant) intervened, I was about to describe the difference that S4C has made to Welsh economic and cultural life. 
 We will shortly receive the results of the census in Wales, which will give us a figure for the number of Welsh speakers for the first time in 10 years. There are strong indications that it will show a slight increase in the number of Welsh speakers; if that is the case, it will be the first time in a century that we have been able to reverse the trend. It will have come about almost entirely because of the increase in educational opportunities and the fact that many English-speaking parents choose a Welsh language education for their children. They choose for their children to be brought up in a bilingual atmosphere; for example, a third of children attend Welsh language education in the Rhondda-Cynon-Taf area. S4C has played a role in normalising the Welsh language—''normalising'' is the term used by linguists—from a fringe language that was used only in chapel, farm or pit in some areas of Wales, to a thriving, modern European language. The bilingual experience reflects more closely the reality of modern Europe than the monolingual experience of England. S4C's role in promoting that has been crucial. However, S4C has not just done a cultural job, it has also done a huge economic job and some 2,000 people are employed in Wales as a direct result of that. 
 The hon. Member for Ogmore mentioned some of S4C's real, significant achievements in the field of film production, although he did not talk about cartoons. S4C is heavily involved in multilingual international cartoon production. Cartoons are either produced originally in Welsh and then dubbed, or made back-to-back in Russian, English and many European languages. S4C's ''Sali Mali'', a Welsh child's favourite cartoon character, is being exported to Korea and I hope that that peace-loving character can do something to help the present situation there. 
 The Welsh language film ''Hedd Wyn'' was the first to have been nominated for an Oscar. That was the equivalent of Wales winning a rugby match against England. Wales gained kudos from the fact that a film made in a 2,000-year old Celtic language that had been ignored for a long time was in contention for an Oscar for the best foreign language film. That kind of thing changes a speakers' perception of their own language. Their language should not be downgraded or treated badly; it should be passed on to the next generation. That is the huge change that S4C has made. 
 On Sunday night I had the privilege of meeting Gwynfor Evans. Committee Members will know that Gwynfor Evans was the leader of Plaid Cymru during the campaign for S4C. He threatened to starve himself in order to change the mind of a Government who had backtracked on their original commitment. At the moment, Gwyn is in hospital in Aberystwyth. He is 90 years old, but he still follows our debates and he is 
 aware of what is happening to his child—his plentyn—which is how we in Wales think of S4C. He was keen to know what was happening to the Bill and he was keen carry on with the work that had already been established. 
 S4C is not just about the Welsh language and Wales—it is the window through which Channel 4 went into Wales. It was always a curious thing to watch S4C, although not so much lately since its productions have become more Channel 4-like. In the early days, S4C specialised in rural antics and nice, homely dramas, which would cut at 9 o'clock, perhaps to the latest scandalous episode of ''Brookside''. That was quite amazing. S4C somehow managed, in its early days, to contrast its more traditional mode of television production and the cutting-edge stuff from England and still succeed in making its way in the Welsh language. 
 There has been a two-way traffic. Not only has S4C brought Channel 4, and its films, into Wales and given a different perspective in the Welsh context, but it has produced much home-grown talent that has gone to England. Huw Edwards, who reads the BBC news, started as a newsreader on S4C, Ioan Gruffydd—''Hornblower''—started on S4C as a Welsh language actor and now he is a heartthrob in teenage girls' bedrooms throughout England and Wales and Siân Lloyd, with the weather map, also started on S4C. [Interruption.] I do not know if she has joined the Liberals. We will not go down that path. 
 I hope that the Committee will agree with me that S4C has enriched the cultural diversity of the United Kingdom. I am sure that developments in Scotland and, in time, in Northern Ireland, will do likewise. My questions to the Minister on the clause are similar to those of the hon. Member for Ogmore, and I hope that the Minister will respond to them. It is an obvious step forward to have S4C 2, or Sianel Pedwar Cymm Dau, recognised as a public service. Broadcasting the proceedings of the Assembly could only be a public service; I do not think that anyone would willingly undertake it as a commercial venture. S4C should be congratulated on broadcasting it, and on doing so with its money and no additional funds.

Richard Allan: The hon. Gentleman referred to the coverage of the Welsh Assembly. We should give credit to S4C for achieving that. By comparison, the Scottish Parliament could not find anyone to broadcast its proceedings, as it did not have a broadcaster. It had to resort to webcasting, which has its benefits but is nothing like as good as having stuff broadcast across the airwaves.

Simon Thomas: The hon. Gentleman is correct. I was just going to mention how different the experience has been in Wales due to the fact that there was a broadcaster ready to broadcast.
 It was not a done deal that S4C would take the job. Why should S4C broadcast the proceedings of the National Assembly? The Assembly is bilingual, so its proceedings would not necessarily count as a Welsh language programme. S4C has therefore had to create a whole milieu—programmes, commentators and so forth—around the broadcasting of the Assembly to 
 create the right atmosphere. The only thing that can be said against the broadcast—and it is not S4C's fault—is that it has not increased interest in the National Assembly. That is nothing to do with S4C, I am sure; we need to address something deeper in our political psyche. 
 Now that we have accepted S4C Dau—or S4C 2—as a public service, I wonder whether the Minister would elaborate on the other sorts of service that S4C could deliver. The hon. Member for Ogmore mentioned a website; that certainly is an idea to take forward. At the moment, the best Welsh language website is undoubtedly that of the BBC. S4C might have a future role in relation to that, and international viewing and webcasting, too. 
 Clause 200 mentions new services that S4C would be empowered to undertake.

Peter Atkinson: Order. If the hon. Gentleman wants to raise particular technical points, I would ask him to wait until we discuss the appropriate clause. To clarify what I said earlier, I am happy to have the kind of wider debate that the hon. Gentleman is taking part in, but it would help if he would leave his technical points until the appropriate moment.

Simon Thomas: Thank you, Mr. Atkinson. In that case, I will wait until we debate clause 200 before I make my point.
 I should like to consider the future of S4C, and in particular its financial security, which is covered by clause 202. It is very welcome that any lack of clarity about the Secretary of State's powers to increase funding for S4C have been removed by the new clauses. As I understand it, it is now permissible for S4C to have a higher than RPI increase in its funding. Permissibility is one thing; receiving more funding is another. In relation to Scotland, the comment was made that because the funding for Scots Gaelic programmes has not had an automatic RPI increase, it has decreased in real terms over the years. That has not happened to S4C; its funding has kept pace with inflation. 
 The problem is that S4C has had to cope with the digital revolution. It had to produce a new channel—S4C Dau—to deal with the National Assembly, produce other digital programmes available on digital, terrestrial or satellite, and invest heavily in extra programmes. S4C is making more programmes in the Welsh language than ever before. It is certainly making more than were envisaged 20 years ago and more than were being delivered even 5 years ago. Yet it has not had a penny piece of additional funding. That is not a bad thing in itself because S4C might be able to cope with the additional demands. However, the broadcaster has identified about £3 million as the real-terms shortfall of what its position would have been without digital, although it now has to cope with the new digital services. 
 It is worth reminding the Committee that S4C is the only public service broadcaster that has not received an increase above and beyond its usual increase to take specific account of digital broadcasting. The BBC received considerable extra sums for digital broadcasting and did very well out of it. We debated 
 whether that was good or bad and whether it was competitive earlier. Channel 4 invested heavily in digital and has gone a little into the red as a consequence. S4C is concerned that there could be deleterious effects in the next year or so on the standard of programming in Wales if the funding formula does not include some recognition of the additional costs of digital broadcasting. 
 I have detected an effect on S4C's programmes, although that is only a personal view from the programmes that I watch. I have huge admiration for the hon. Member for Maldon and East Chelmsford because he seems to remember every programme that he has watched during the past 20 years. I can rarely remember titles although I have a vague knowledge of programmes that I have seen over the years. It would be too strong to suggest that a panic is coming into S4C, but a bit of stress is being introduced. There is not so much a decline in programme standards. Some programmes are trashy because they are meant to be. That is the range that we get, and it is good that we get trashy programmes in Welsh. We do not want all the programmes to be chapel programmes; we want trashy programmes because it is important to attract people to watch. 
 There is a little bit of stress in S4C. The evening schedules have been changed but I do not think that all the changes are totally voluntary. S4C has tried to chase a declining market because it is losing viewers, especially for key programmes. Rearranging schedules in order to attract and keep viewers is a positive response to that. 
 There will be medium-term difficulties—two or three years down the line—if S4C does not get a little additional help to pay for the digital explosion and expansion. There are also extra services that the hon. Member for Ogmore mentioned such as webcasting or better internet services.

Michael Fabricant: The hon. Member for Rhondda said that people still want to watch Channel 4 in English. Does the hon. Member for Ceredigion think that the Welsh authority has a role in helping to fund the roll-out of Freeview digital terrestrial television, which might allow that to happen? That is more technically possible in some areas than installing satellite or cable.

Simon Thomas: I accept the hon. Gentleman's views about technical possibilities but financial possibilities are rather limited. I do not think that S4C's authority would want to spend in such a way. The hon. Gentleman might not know that when viewers in Chile, Argentina or England, in particular, choose to have S4C on their digital television, S4C has to pay for that. That is why it does not press so hard to expand its services via satellite dishes to England. That might be a reason why we have not seen the expansion that is possible in the City of London, for example. There are tens of thousands of people of Welsh descent there who might want to access S4C—if only for the rugby.
 The hon. Gentleman reminded me of something of which it is worth reminding the Committee. Many members of the Committee, unlike him, will not have seen S4C. They will not have seen the subtitles in English, and will certainly not have seen the subtitles in Yiddish. They will not know that 76 per cent. of S4C's programmes are subtitled in English. That means that it is not quite so easy to say that English speakers do not have any access to S4C programmes. Also, it does not follow that people will not have access to Channel 4 programmes. They will be on at a different time—perhaps at 2 o'clock in the morning. However, VCRs, if not yet DVDs, are now pretty widespread in the Welsh valleys. It is important to remember that S4C is not a closed Welsh language service that English speakers cannot access. They can access the many programmes that were originally English programmes on Channel 4; and at least three quarters of programmes have subtitles in English on page 889.

Richard Allan: Can the hon. Member for Ceredigion tell the Committee about the position of Freeview subscribers in Wales? Do they get S4C and Channel 4? Is Freeview an adequate solution? In many parts of Wales, digital terrestrial television is not ideal.

Simon Thomas: I understand that people can get Freeview, but not in all parts of Wales. However, I am technologically illiterate on the matter.

Michael Fabricant: I may be able to assist. Relay transmitters are, generally, not transmitting digital terrestrial television. In Wales, it is relay transmitters, rather than main transmitters, that fill in the gaps caused by the topography. Digital terrestrial television needs to be spread among relay transmitters.

Simon Thomas: I am grateful to the hon. Gentleman for explaining that—although I might have suspected the reason.

Andrew Robathan: I do not want to detract in any way from the hon. Gentleman's views on S4C and its popularity, but I do not want him to get carried away with the idea that people of Welsh descent in London and Westminster, for instance, are dying to watch it. I am of Welsh descent and I can honestly say that nobody in my family—which is mostly around London and Leicestershire—has ever expressed a great desire to see S4C in London.

Simon Thomas: We should lock the hon. Gentleman in the cottage below Cader Idris where his hon. Friend goes on holiday. He should watch S4C compulsorily for weeks; I am sure that that would change his mind. However, I would promise him that I would not put the National Assembly for Wales on, so he would be okay.
 I hope that the Minister will be able to respond positively on the additional services that S4C will be able to undertake and on the possibility of making a business case for additional funding for S4C to deal with the challenges of digital broadcasting.

Parmjit Dhanda: At long last it is my turn. I am not a Welshman, but it is important that we have non-Welshmen talking about S4C. My constituency is very close to Wales and I have
 contributed to the Welsh economy. Recently, I was having a few drinks on a night out in Aberystwyth and who should I find propping up the bar but the hon. Member for Ceredigion, no less.

Chris Bryant: He is stalking you.

Parmjit Dhanda: I can promise the hon. Gentleman that that was not the case.
 The Minister may well remember an adjournment debate in November 2001 on sport on television. Many people in my constituency of Gloucester are rugby mad and, I would say, play better than the Welsh or anybody else at the moment. The rugby club is riding high at the top of the league and is doing well in the Heineken Cup. During the British Lions tour, people were unable to watch matches on terrestrial television in most of the United Kingdom but they could watch them on S4C. People therefore made the trip 20 minutes or half an hour down the road to watch the games. I was immensely grateful to S4C for that. 
 In Gloucester, there is a big displaced Welsh community. The hon. Member for Ogmore and the hon. Member for Ceredigion have mentioned a similar thing in London and many other big cities. It is important that S4C is available to those people. 
 Clause 200 is a welcome addition to the Bill. We may not watch S4C 2 on a daily basis, but it is good that it will no longer require an ITC licence and that the Welsh Assembly will be broadcast as part of a public service. We should encourage people to participate and be involved in politics, whether by listening to us, here in this Room, or in the House of Commons, the House of Lords or the Scottish Parliament. It is important to provide that service if possible.

Michael Fabricant: The hon. Gentleman raises an interesting and powerful point that nobody else has mentioned. He will notice that sound services are referred to in clause 200(9) and will no doubt be aware that the BBC has launched new digital radio channels. The Bill enables S4C to launch a series of Welsh digital radio channels. Would he welcome that?

Parmjit Dhanda: Yes. I was going to elaborate on the point about digital services, which ties into clause 202. I am sure that S4C feels that it does not receive the same degree of support as other public service providers. I wish to flag up that point to the Minister, who will surely wish to comment. He will probably say that, unlike most other public services, S4C can make money by advertising.
 I will curtail my remarks to give the Minister the opportunity to answer contributions to the debate 
 while the points are still fresh in his mind. I welcome the clauses relating to the Welsh authority because they are good for S4C and for television in the United Kingdom generally.

Kim Howells: I welcome the opportunity to say a few words about the Bill generally, but I shall stick to clause 198 because we will deal with each clause in turn.
 I add my compliments to those paid by my hon. Friends the Members for Ogmore and for Gloucester (Mr. Dhanda) and the hon. Member for Ceredigion on S4C's performance. It has been a remarkable story and the source of a great deal of creative employment in Wales, which is something we have badly needed. It is an institution of which we should be very proud. Indeed, I enjoyed being part of the 20th birthday celebrations. I attended a glittering premier in Cardiff of a film made by S4C—I was even given a free drink.

Michael Fabricant: Was it Welsh?

Kim Howells: It may well have been.
 The film was about the Mabinogion, which may be one of the films to which the hon. Member for Ceredigion referred when he talked about S4C's productions being sent around the world in a great many different languages. 
 The Government have made it clear that their intention is for the Welsh authority, like the BBC, to remain self-regulating on matters such as impartiality and the fulfilment of its Tier 3 remits. However, we propose that the authority should, again like the BBC, be subject to regulation by Ofcom in relation to negative content requirements and industry-wide quotas and obligations. 
 The clause provides that Ofcom's functions will include the regulation of the Welsh authority to the extent provided in the Bill and in part V of the Broadcasting Act 1996. Provisions in the 1996 Act relate to the functions of the Broadcasting Standards Commission to which the Welsh authority is already subject and which will be exercised by Ofcom in the future. There will be an opportunity to discuss in detail the clauses that set out Ofcom's other regulatory functions in relation to the Welsh authority, if the Committee so desires. 
 Question put agreed to. 
 Clause 198 ordered to stand part of the Bill. 
 Further consideration adjourned.—[Mr. Jim Murphy.] 
 Adjourned accordingly at one minute to Five o'clock till Thursday 16 January at five minutes to Nine o'clock.